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Devils Backbone Brewing Llc An Idea Brews Case Solution & Answer

Devils Backbone Brewing Llc An Idea Brews Case Solution

Introduction

This case discusses the concepts of Strategic thinking and actions. The founders of Devil backbone Brewing LLC (DBB), Steve and Heidi were evaluating the growth and success of the company. DBB has done well in its business growth, and has earned a brand name for its beer. The company hasa huge consumer base from all around the globe. The company is known as the largest brewery in its region. The company has covered a successful business journey. Along with loyal consumers; the loyal beer consumers also supported the DBB business at an extensive scale. The company was doing its funding and zoning accusation and locals have also managed to develop their little brewery requirement. After success, the demand for the product increased. DBB was unable to meet the demand in its existing market and there were complaints of being out of stock. Now the management is evaluating the scenario and looking for potential strategies that can help the company to meet the current demand and face this situation. Crandalls was thinking if DBB should increase its production capacity after having an exhausting production line? Or company should outsource the brewery from local brewers? In the last should the company try to manage the business on its own without responding to shortage issues and continue to serve to loyal consumer base?

Problem statement

After years of success in beer production and brewery company estimated to grow 80% i.e. 45000 BBLs. But within forty-five days of the New Year wholesalers revised their estimates and increased the estimated demand. DBB was not able to meet the demand of the existing market, i.e. the company was brewing 40000 BBLs. It was becoming an alarming challenge for the company to deal with the distributors with such shortage in the production. It was a time when the demand was high and the company was supposed to produce more than the actual demand. It was a consecutive 3rd year when the company was unable to meet the demands of the consumers. The outlet’s concerned persons were also sharing their issues regarding the beer shortage. The company was worried about backlash from retailers as well. Now it the company’s future was at stake because there were chances of consumers switching to another brand due to the shortage(Floyd, 2018).

Strategy and management analysis

As we know that Crandall and Heidi started to work on their dream. Rather than working on formal market research; Crandall hired a consultant to find the best machines and equipment that could produce Weiss-style beer, following his taste preferences. Crandall used a market penetration strategy to enter into the market and through out this journey; Crandall launched Japanese equipment, Vienna Lager. The company received awards and medals for its beer’s quality. After the joining of Humphrey,he turned the focus of the company to expand the business and develop operational skills. The company experienced success in a very short period after launch(Chiu, 2006). DBB acquired the market share due to being the best beer seller in the region. Crandall was not following traditional business rules, management decided to follow continuous expansion strategies and operational strategies. The company also focused on asset development and inventory management.

Financial Analysis

There were few investors for the company,whereas the company estimated its product for each year. Exhibit 3 for the projections shows that the cash flows were negative and positive throughout the structure. And, the terminal value of the company was 39,964,241 by the end of 2020,and it had projected the growth of 6% by the end of 2020. Overall, the financial condition of the company was limited to opting for new space and machinery,because at this stage; the company needed more investment and capital to meet the demands of its consumers.  It needed loan, as continuous product shortage tended to reduce the competitiveness of the project. The sales projections show positive and relatively higher sales in every upcoming year. And Net profit estimates also show positive and increasing figures. But,the company does not invest any capital and the cash flows of the company are not sufficient for supporting its expenses. The demand for beer is increasing in the industry and DBB is unable to meet the demand of consumers. Market competition is increasing, so in order to retain in the market for a longer time period; the company needs to get capital investment and meet the consumers’ demand.Further refer to appendix 1.

Operational analysis

The company is not operating on economies of scale.The cost of operations is relatively higher for Devils Backbone Brewing LLC and Idea Brews. DBB can reduce the cost of operations and increase its competitive pricing, which will help it in generating revenue margins. Crandall designed the company’s operations the way traditionally companies in the industry did. So, it was important for the company to manage the operations to effectively manage its business activities and supply chain. Along with financial issues, there were timing issues that also needed attention. The tanks were ordered separately and suppliers wanted them to be ordered in pairs. The lead time of tank time was 8 months before operational so it also needed a solution. On the other hand, it was important to manage the inventory management, and work on innovation and improve their operations.

Marketing Analysis

The company started its promotions and tried to attract its consumers before being certain ofits ability to attract the consumers. DBB promoted its products through retail marketing and showcased its products. DBB did not work properly on demand and supply of its product and designed promotional strategies that generated results, i.e. high demand but the company was not able to meet that demand.Retail marketing generates low-profit margins. The company was doing well in the initial years, but the planning was not feasible for a long-term growth. The team did not have an estimate of the promotional results and how much demand will be generated from the promotional activities………………………..

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